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GDP Revision Lifts Dollar, Dents Gold

Following a fresh set of economic data that beat expectations on Wednesday, gold prices were ever so slightly lower in early trading. Spot gold was down just a hair to $1,307/oz. Likewise, the silver price slipped just 2 cents per ounce to $17.33/oz.

There were also indications that this positive momentum carried over to the beginning of the third quarter in July. Since the beginning of 2016—so roughly over the last year and a half—GDP growth has expanded each successive quarter. During Q2 (from April to June), consumer spending also saw a sharp improvement, rising by 3.3% over the first quarter.

The housing market did pull down the overall quarterly performance: investment in home-building tumbled 6.5%, though this actually wasn’t as bad as the -6.8% initially reported. By contrast, non-residential construction rose by 6.2%, a significant leap from the 4.9% increase reported prior to the upward revision.

In addition, the GDP report showed strong spending by businesses (purchases of equipment were up 8.8%) but very little inflation. Regardless of which inflation measure one chooses to use, it appeared that inflationary pressures helped prices rise by less than 1% during the quarter.

The GDP numbers helped lift the U.S. dollar, helping the greenback finally recover some ground against the euro and yen. The DXY index was about 0.5% higher to 92.7 following the GDP report on Wednesday. The 10-year T-note yield also regained some ground to 2.14%.

Meanwhile, private-sector payrolls showed that 237,000 new jobs were added during the month of August, coming in far above expectations of 185,000. While construction and manufacturing saw some welcome job gains, the vast majority of growth was once again in the service sector. The big news comes when the more comprehensive nonfarm payrolls data for August gets released this Friday.

Stocks were higher in Europe while U.S. indices were mixed. Crude oil prices fell again, although the upheaval wrought by Tropical Storm Harvey along the western portion of the Gulf Coast has sent gasoline spot prices to a two-year high. There are still upwards of 300,000 households in Houston that remain without power. Schools in some districts are likely to stay closed until after the Labor Day holiday on Monday. So far already, the storm has reportedly dropped more rain on the country than any other weather event on record.

This phenomenon isn’t isolated to the U.S. Gulf Coast, either. In India and several of its neighboring countries in South Asia, the raining and flooding of monsoon season have already taken the lives of 1,200 people so far this year. A lack of sufficient infrastructure in the region makes dealing with the humanitarian side of such bad weather (let alone the economic impact) much more difficult.

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